Antitrust Regulators v. Big Tech: The Battle Reaches India

On March 24, 2021, the Competition Commission of India (‘CCI’) took suo moto cognizance and launched an investigation against WhatsApp and Facebook (‘Investigation Order’). This was a result of WhatsApp’s recent notification to its users of changes in its privacy policy and terms of services, which allowed WhatsApp to share user data with its parent company Facebook. The CCI formed a preliminary view that the ‘take it or leave it’ nature of WhatsApp’s updated privacy policy and terms of service appears to be an abuse of dominance and, as such, violates the Competition Act 2002 (‘Competition Act’). This landmark order is the first by which the Indian competition watchdog has, contrary to former practice, delved into an issue such as privacy, which ordinarily falls under other areas of law, such as constitutional law.

The CCI, among other things, observed that privacy is an important non-price parameter of competition over which market players compete and that the impugned data sharing between WhatsApp and Facebook results in the degradation of such non-price parameters. Interestingly, while examining WhatsApp’s privacy policy update of 2016, the CCI observed that the breach of the provisions of the Information Technology Act 2000 and the right to privacy do not fall within its purview. However, in the current proceedings, the CCI has reasoned that the 2016 update did not violate the Competition Act, as it allowed users to opt out of sharing information with Facebook whereas, in contrast, the 2021 update does not.

The CCI’s recent approach towards data localisation and data privacy is a paradigm shift which is in conformity with global practices. In August 2020, while dismissing allegations of abuse of dominant position, the CCI observed that misuse of sensitive consumer data may raise antitrust concerns along with data protection issues. However, the most notable development in this regard was the CCI’s Market Study on Telecom Sector (‘Market Study’), which was released earlier this year. Through this study, the CCI found that privacy can take the form of a non-price parameter of competition and that diluting the parameters for privacy protection inadvertently leads to an abuse of dominance, inasmuch as it implies a lack of consumer welfare.

As expected, WhatsApp and Facebook challenged the CCI’s investigation order before the Delhi High Court, their primary contention being that the CCI lacks jurisdiction to take suo motu cognizance of the matter, when the same issues are already pending adjudication before the Supreme Court and the Delhi High Court. The Delhi High Court observed that, while it would have been prudent for the CCI to have waited for the outcome of the aforementioned petitions, the failure to wait would not in itself render the investigation order moot, since there is no inviolable rule that the pendency of suits before other forums would oust the jurisdiction of the CCI. The order of the Single Judge of the Delhi High Court has been challenged and is currently pending before the Division Bench, the outcome of which is likely to be monumental for the competition regime and data privacy in India.

Unsurprisingly, the CCI is not the first antitrust regulator to have initiated an investigation against WhatsApp over its new privacy policy. Competition regulators in Turkey and Argentina have launched similar investigations against WhatsApp and Facebook over their updated privacy policies and terms of service. As a matter of fact, WhatsApp has previously been fined €3 million (USD 3.6 million) by the Italian Competition and Markets Authority for forcing its users to agree to sharing their personal data with Facebook.

As it turns out, Big Tech, particularly Facebook, has a history of facing antitrust scrutiny. On June 11, 2021, a bipartisan group of lawmakers in the US House of Representatives introduced five antitrust bills to rein in the competitive power of the tech giants—Amazon, Apple, Facebook, and Google. The bills focus on the ability of these companies to acquire new business and extend preferential treatment to their own services. If passed, these bills could force the tech giants to overhaul their business. These bills have come in the backdrop of a sixteen month-long investigation launched by the US House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law against the aforementioned companies. Further, the US Federal Trade Commission recently sued Facebook for illegally maintaining its monopoly and the wrongful acquisition of rival social media apps, Instagram and WhatsApp. Similarly, for its involvement in the Cambridge Analytica scandal, Facebook was fined $5 billion by the Trade Commission. Facebook was also fined $6.5 million by the Canadian Competition Bureau over sharing personal data of users with the third party developers in violation of its own privacy claims.

In Europe, the European Commission as well as the UK’s Competition and Markets Authority on June 4, 2021, launched formal antitrust investigations against Facebook to assess whether the company distorts competition in the classified advertising market by using data collected from rival services. In January 2019, the German competition regulator, the Federal Cartel Office issued a landmark judgment against Facebook wherein it found Facebook’s terms of use to be abusive and in violation of German competition law. Further, it imposed an embargo upon the impugned terms which inter alia allowed Facebook to share data with its subsidiaries, WhatsApp and Instagram, as well as third party apps. The Cartel Office’s reasoning was that the scope of Facebook’s data collection without the consent of its users and the subsequent sharing of such data between its services, is an abuse of power. The order of the Cartel Office was further upheld by the German Federal Court of Justice. Recently, however, the Higher Regional Court of Duesseldorf (the appellate body for decisions of the Cartel Office) stayed the proceedings before the Cartel Office and filed a request for a preliminary ruling before the European Court of Justice. The ECJ has been requested to clarify whether the Federal Cartel Office can adjudicate a violation of data privacy under the General Data Protection Rules.

Circling back to India, other than the CCI, WhatsApp’s updated terms of use and privacy policy have also been challenged before the Supreme Court of India and the Delhi High Court on non-competition parameters. Even the Government of India has come down heavily on WhatsApp by issuing a cautionary notice which directs WhatsApp to rollback its updated privacy policy. On the other hand, WhatsApp is adamant that its update is in conformity with the laws of India and refuses to withdraw the same. Whichever way this plays out, the outcome of these adjudications will have a considerable impact on competition and data privacy in today’s digital world.

Apurv Pratap Singh is an associate at Saikrishna & Associates, an Indian law firm.

Hrishav Kumar is a law student at the National University of Study and Research in Law, India.

The views expressed are those of the authors and do not necessarily reflect the opinion of Saikrishna & Associates.